CGS International upgraded its recommendation on Grab from “hold” to “add” and raised the target price by 29.6% to US$7 from US$5.40. This positive revision is mainly due to improvements in Grab’s financial services segment.

Analyst Jacquelyn Yow noted that losses in the financial services segment are expected to “narrow sharply,” with the segment predicted to reach operating breakeven by the end of 2026.

Reaching this milestone would demonstrate “management’s confidence in the segment’s profitability trajectory,” she added.

Financial Services Segment Shows Strong Turnaround Potential

Yow forecasts that all three of Grab’s segments—financial services, deliveries, and mobility—will be positive on an adjusted Ebitda basis by fiscal year 2027.

For Q3, financial services revenue is expected to increase 50% year on year to US$96 million. This growth is attributed to deeper lending penetration within Grab’s ecosystem and increased digital bank loan disbursements.

Adjusted Ebitda losses for financial services are projected to narrow to US$24 million in Q3, aided by lower credit loss provisions and scaled loan disbursements.

The segment’s Ebitda losses are expected to halve to US$43 million in FY2026 from US$103 million in FY2025. This improvement is driven by better risk models after years of merchant and customer data collection.

Credit loss allowances declined from 12% to 9% between 2022 and 2024, while the loan book grew an average of 70% annually, supporting earnings growth.

Deliveries and Mobility Segments Drive Revenue Growth

Grab’s deliveries segment is forecast to generate US$468 million in Q3 revenue, a 23% increase year on year. Gross merchandise value (GMV) is expected to grow 24% to US$3.7 billion, surpassing mobility growth.

Despite protests in Indonesia affecting some ride-hailing drivers, deliveries benefited from the work-from-home trend. This helped offset slower mobility GMV growth caused by reduced traffic.

The mobility segment is projected to achieve US$314 million in Q3 revenue, up 16% year on year, with GMV growing 18% to US$2 billion.

The mobility margin is expected to remain stable due to rising user engagement and initiatives such as eco-friendly vehicles with AI-powered safety technology launched in Q2 2025.

Q3 Revenue and Earnings Forecast Highlight Positive Outlook

Overall, CGS International expects Grab’s group revenue for Q3 to rise 23% to US$881 million.

Adjusted group Ebitda is forecast to increase 38% year on year to US$124 million. This growth is attributed to stable or improved margins in deliveries, resilience in mobility margins, and narrowing losses in financial services.

On October 6, Grab shares closed at US$6.39 on Nasdaq, marking a 3.7% increase year to date.

PHOTO: GRAB

This article was created with AI assistance.